It’s Time to Attack Putin’s Soft Underbelly

Russian president Vladimir Putin delivers a speech at his election headquarters in Moscow, March 18, 2018. (Reuters/Sergei Chirkov/Pool)The assets his cronies have piled up in the West demand more scrutiny.

Vladimir Putin was reelected president of Russia today in an event as predictable as the sun’s rising. But his biggest asset hasn’t been his iron grip on Russian politics, it’s been the fecklessness and passivity of his Western counterparts in the face of his outrageous actions. Garry Kasparov, the former world chess champion who has lived in exile in the West since 2013, wrote on Facebook that Putin, like most dictators, prefers playing poker to chess. “You can win at poker with a weak hand if your opponents play foolishly and keep folding their cards.”

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It was to plan a better series of future moves against Putin that Kasparov and Thor Halvorssen, the leaders of the Human Rights Foundation, assembled a collection of 30 anti-Putin experts in New York last Friday. Called PutinCon, the event featured everyone from former intelligence officials to a former Red Army veteran to former U.S. attorney Preet Bharara to Alexei Navalny, the anti-corruption crusader who was blocked from the presidential ballot in Sunday’s presidential election in Russia.

All of them agreed that the West should confront Putin and take serious measures to counter his increasingly brazen behavior. According to British foreign secretary Boris Johnson, this behavior now includes the stockpiling of the deadly nerve agent Novichok, recently used against Sergei Skripal, a former Russian spy granted asylum in Britain, and his daughter Yulia.

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Mikhail Khodorkovsky, an opponent of Putin’s who is exiled and now lives in Switzerland, says that Russia has become a gangster-run state. Speaking of the attack on the Skripals, he told the BBC, “Either Putin has given his consent to this operation, or he doesn’t control the secret service to such an extent they can do it without his approval.” The FSB, the successor to the Soviet Union’s old KGB secret police, has seized complete control over Russia’s security apparatus. The FSB is now more powerful than the KGB was at the time of Stalin — and much more independent from the Kremlin.

According to Khodorkovsky, a group of up to 100 people in Putin’s orbit have “learned to manipulate” Putin “quite effectively.” He said the only way to hurt Putin and his gang is to “undermine his reputation” in the eyes of the Russian public and to focus efforts on attacking the overseas wealth of Putin cronies. In 2015, French economist Thomas Piketty and a group of his colleagues estimated total Russian wealth overseas at $800 billion.

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Ian Birrell, writing for Britain’s Mail on Sunday yesterday, noted the irony of Putin cronies trashing Western values yet trusting the rule of law in their own country so little that they send billions of dollars abroad. “They stash their cash in our banks, buy our properties, fight legal battles in our courts and send their children to be educated in our schools.”

Toomas Ilves, who served as president of Estonia from 2006 to 2016, told the PutinCon audience that he was personally sickened when he learned that the daughter of Russian foreign minister Sergei Lavrov graduated from his alma mater, Columbia University.

Ilves and Swedish economist Anders Aslund, who is now a scholar at Washington’s Brookings Institution, says there are clear paths available to the West to attack Putin’s cronies. They note that most Western nations don’t permit anonymous investments that allow assets to be concealed. The two big exceptions are Britain and the United States.

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A month before he left office in June 2016, in the wake of the Brexit victory, British prime minister David Cameron organized an international conference to combat anonymous offshore ownership, including some 36,000 properties in London with a value of $156 billion. The rest of Britain has some 70,000 anonymously owned properties. “This is why you have all those properties in Belgravia standing empty,” Aslund told the PutinCon audience. He estimates that Putin’s inner circle exports some $40 billion to $50 billion in assets overseas every year.

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Following his 2016 conference, Cameron pushed eleven countries to increase their transparency, but he then suddenly resigned. His successor, Theresa May, hasn’t followed through on the issue. In the wake of the nerve-agent attack on the Skripals, it’s time for her to act: She should ban anonymous shell corporations from buying up property in Britain.

The United States could also do a lot more. In December 2016, the Wall Street Journal revealed that, under “attorney-client privilege,” “tens of billions of dollars every year move through opaque law-firm bank accounts that create a gap in U.S. money-laundering defenses.”

Freezing the assets of Putin’s oligarchs would send a message that the West is finally serious about confronting Russia’s misbehavior.

This is where the Trump administration can prove its critics — who accuse it of being soft on the Russians — wrong. In August, Trump signed into law a bill calling for far-reaching investigations into “senior foreign political figures and oligarchs in the Russian Federation” — including “spouses, children, parents, and siblings” — and their assets in such popular real-estate markets as Miami, Ft. Lauderdale, Palm Beach, New York, and Los Angeles. Stepping up those probes and actually freezing the assets of Putin’s oligarchs would send a message that the West is finally serious about confronting Russia’s misbehavior.

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The incredible flow of assets out of Russia into Western safe havens is a clear vulnerability in Putin’s authoritarian system. At a minimum, the West should prohibit law firms from acting as banks and also prohibit real-estate entities from effectively acting as banks for the oligarchs. Anonymous purchasers should no longer be able to hide their activities. It is only through moves like this that the West will get the attention of Putin and his cronies. The only thing a dictator such as Putin respects is strength, and it’s time those who oppose his loathsome values acted as if they understood that.

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